Thursday, November 18, 2010

Time For A new Beginning... And Open Mindedness

by Les Carpenter
Rational Nation USA

As an independent conservative - classical liberal I watch, read, and listen to the tone of todays political snark. I have certainly enjoyed my many snarky posts and the battles I have waged against the "modern liberal theology." Which is to say the "redistribute the wealth" cadre of Americans that essentially desire European style socialism.

My fellow conservative blogger and friend Tim Daniel, who operates the Left Coast Rebel blog had an interesting post up this past Sunday. It essentially was aimed at the whole "redistribution of wealth" through taxation debate. As an individual (I can only represent myself at this point) I agree with the points he made in his post. Below is a snapshot of his post;

Rich articulates the inner rationale by which the newspaper’s liberal readership justify their political prejudices. He lends his Harvard-educated eloquence to these prejudices, providing his readers with reassurance that they’re absolutely right and that anyone who disagrees with them is hopelessly ignorant. 
“Obviously, these Republican voters are so stupid they don’t even read the New York Times!”


To spare you the effort of actually reading Frank Rich’s column, permit me to extract the most important words in it:


“very wealthy Americans . . . rich people . . . The wealthy Americans . . . those individuals at the apex of the economic pyramid — the superrich . . . The top 1 percent of American earners . . . the very top earners . . . the wealthiest . . . the wealthiest Americans . . . plutocracy . . . the top 1 percent of Americans . . . the very rich . . . the superrich . . . the top earners . . . Those in the higher reaches . . . the wealthiest Americans . . . the superrich”


The liberals whose prejudices Frank Rich intends to flatter are evidently obsessed with “the wealthiest Americans” and fervently believe that the biggest problem facing the nation is that these “superrich” don’t pay enough taxes.


Also, blame Bush!


Ah, yes. Beautiful and spot-on. I love the story that he writes about at the beginning of the post as well, a little 'behind the scenes' on a Instapundit linky-love request.


RTWT

As I see it this nation is so focused on the issue of taxation it fails to see the real,  more threatening, and underlying problems. Which are A) the loss of our manufacturing infrastructure and the good paying jobs that it provided the middle class, and B) the growing disparity in wages between the top echelon of society {Business owners, corporate CEO's, and Executive managers}and the rest of the wage earners in America.

I remind all at this time I am first and foremost a strong unyielding advocate of capitalism. I also have tirelessly advocated limited government, the pursuit of liberty, and the protection of individual freedom for all  regardless of race, ethnicity, educational background, social status, sexual preference, or religious proclivity as well all other natural rights that every living being has the right to enjoy.

Since LCR's post and the provided link was with respect to the issue of taxation, more specifically the redistribution of wealth through the tax code I will address this first. The progressive tax system, combined with over regulation, subsidies to business interests, and crony capitalism {corporate welfare} has resulted in our nation actually receiving by far less federal revenues than it might under a flat tax for both individuals and businesses.

I posted a few thoughts on this subject in the recent past. I am reposting excepts from my original post today with the appropriate link for those open minded individuals that might care to read and consider the entire article.

To expand upon the subject of limited government, I will limit today’s commentary to taxes and regulations.

By way of definition:

Limited - characterized by enforceable limitations prescribed (as by a constitution) upon the scope or exercise of powers...

Government - the act or process of governing, specif.: authoritative direction or control...

From these definitions the concept of limited federal government is crystal-clear. The U.S. government to retain its right to govern must do so within limitations as set forth in the Constitution and the tenth amendment . The federal government has a clearly defined function that has been all-but-ignored.

In essence we have allowed our government to create a tax code that is as mind-boggling as it is convoluted, requires hundreds of thousands if not millions of pages, and keeps the tax accountants and lobbyists in business. It also creates uncertainty within the business sector and markets, and decreases our competitive standing in the world.

Achieving limited government in taxation would be quite rudimentary and uncomplicated, were it not for the pull peddlers. But the moment the United States government instituted the graduated income tax with its exemptions, deductions, and loopholes the stage was set for the Leviathan tax code that exists today. Slaying Leviathan will not be easy but it is necessary. Conservatives should love to hear somebody in the Tea Party or Republican Party shouting it from the rooftop.

I present, therefore, an "independent" conservative solution. Such that would give government increased tax revenues and simplify the tax code so Reagan's idea of the post card return could be realized. It would also eliminate the need for tax lobbyists that are engaged in “protecting” the interests of business.

1.1 - Graduated tax would be retained for individuals gross earning up to 35K.
1.2 - All gross earnings above 35K would be taxed at a flat rate.
1.3 - There should be no exemptions, deductions or other considerations that would have the effect of lowering the taxable amount.
1.4 - Individual tax rate of 10% on all gross income above 35K. To change this should require a 60% affirmative vote of the 50 states making up the union of The United States of America.

2.1 - Businesses and Corporations should be taxed on the flat tax basis.
2.2 - Business and Corporations should cease to receive government subsidies and corporate welfare. Too big to fail would no longer be an operative word.
2.3 – Deductions for businesses and corporations should be limited to legitimate business expense as defined by current cost accounting principles.
2.4 - Business and Corporate tax rate should be 10% after legitimate business expenses are deducted.

Simple and straight forward, the above would create an environment in which everyone would know month to month and year to year what their tax liability would be. Planning for business investment and expansion would thus proceed on a stable, level, playing field that would exponentially increase the dynamism of American entrepreneurism.

The rest of this article can be found right here for those interested in the full text.

 A couple additional and final comments...  It is likely adopting a tax code as described in my article would not only add to the tax revenues of our federal governemnt it would result in individuals keeping more of their hard earned income in their pockets. Additionally it would result in those businesses {corporations} who now pay little to nothing in taxes paying their "fair" share to support this nations infrastructure.

This nation achieved its greatness, global influence, and strength BECAUSE of the strong middle class it created. There can be no question that the American capitalist system was responsible for creating the environment that fostered our nation's ascension to preeminence in the 20th century. The strength of the American capitalist system rested in the reality that it rewarded those willing to take the risk required to build businesses that would satisfy a demand(s) and thereby create jobs.

The other side of the equation, and I imagine I will get criticized by some as being " pro union or naive",  is that because of collective bargaining the American workforce grew to become the largest "middle class" the world has known. In other words our greatness has been in part because we had a strong and financially sound center, IE: middle class.

What we see today is a growing disparity between the upper echelon of society and the rest of America. This is due to many factors that go beyond the reach of this blog post. However, the two most compelling reasons for this are A) the nations focus on free trade and open markets, and B) the move of our industrial base and good paying jobs off shore in the name of competitiveness to save American corporations.

Just a couple of brief comments. The two are deeply interconnected. Government trade policy {often driven by misguided corporate CEO's} has resulted in corporate decisions that has not been in our countries best interest and certainly not in the best interest of the American workforce.

In our politician's/CEO's desire to create and support open and free trade we have lowered trade barriers for our foreign competitors. This has allowed foreign countries to import their products and market them, most often at lower prices than American manufactured goods. The result, lost American jobs as American consumers purchase comparable products at a cost savings to their families..At the same time foreign trading partner's bring in American manufactured goods and impose import tariffs that essentially insure that the same or similar product manufactured in their country are competing on a level playing field. Don't forget that the American workforce remains among the most productive in the world with respect to out per labor hour. The classical measurement of labor productivity.

For those who may be desirous of further information and detail I refer you to "Three Billion New Capitalists." Additional information on price and where to purchase this excellent book can be found here. More information on Trade policy can be found here, here, and here.

The nation is experiencing an increasingly large gap between the the wealthiest Americans and the middle class. The following except from a detailed study by G. William Domhoff entitled  "Who Rules America" highlights this undeniable reality. While the data represents 1982 through 2006 there is every indication the gap has continued to increase.

Table 6: Distribution of income in the United States, 1982-2006
Income
Top 1 percentNext 19 percentBottom 80 percent
198212.8%39.1%48.1%
198816.6%38.9%44.5%
199115.7%40.7%43.7%
199414.4%40.8%44.9%
199716.6%39.6%43.8%
200020.0%38.7%41.4%
200317.0%40.8%42.2%
200621.3%40.1%38.6%
From Wolff (2010).

The rising concentration of income can be seen in a special New York Times analysis of an Internal Revenue Service report on income in 2004. Although overall income had grown by 27% since 1979, 33% of the gains went to the top 1%. Meanwhile, the bottom 60% were making less: about 95 cents for each dollar they made in 1979. The next 20% - those between the 60th and 80th rungs of the income ladder -- made $1.02 for each dollar they earned in 1979. Furthermore, the Times author concludes that only the top 5% made significant gains ($1.53 for each 1979 dollar). Most amazing of all, the top 0.1% -- that's one-tenth of one percent -- had more combined pre-tax income than the poorest 120 million people (Johnston, 2006).
But the increase in what is going to the few at the top did not level off, even with all that. As of 2007, income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01% -- that's one-hundredth of one percent -- receiving 6% of all U.S. wages, which is double what it was for that tiny slice in 2000; the top 10% received 49.7%, the highest since 1917 (Saez, 2009). However, in an analysis of 2008 tax returns for the top 0.2% -- that is, those whose income tax returns reported $1,000,000 or more in income (mostly from individuals, but nearly a third from couples) -- it was found that they received 13% of all income, down slightly from 16.1% in 2007 due to the decline in payoffs from financial assets (Norris, 2010).
And the rate of increase is even higher for the very richest of the rich: the top 400 income earners in the United States. According to an analysis by David Cay Johnston -- recently retired from reporting on tax issues at the New York Times -- the average income of the top 400 tripled during the Clinton Administration and doubled during the first seven years of the Bush Administration. So by 2007, the top 400 averaged $344.8 million per person, up 31% from an average of $263.3 million just one year earlier (Johnston, 2010). (For another recent revealing study by Johnston, check out "Is Our Tax System Helping Us Create Wealth?").
For those of my readers that may be intrigued by the short except above the entire detailed study can be found at, Power in America - Wealth, Income, and Power. Whether one agrees with Mr. Domhoff in total is not what's important. What is important is that there is truth in what he says, and he presents supporting data. Therefore, we all, out of our own long term self interests ought to take heed. 

 I have often said as the middle class goes so will go America. America has a shrinking middle class. America's powerful industrial base, once the envy of the world is all but non existent. The trade policies of this nation rather than fostering trade that is advantageous to our nation fosters trade that favors our trading partners. And the tax code is rife with loopholes for corporations.

Creation of wealth can only occur through production of goods desired by society. As our capacity to produce continues to decline accompanied by the loss of good paying jobs, and the middle class continues to shrink, as corporations offshore more and more of our production capacity, and as the nations continues to pursue a tax code (policy) that is in fact counterproductive we will soon be a third world country. With all that implies.

Yup, the republicans won the House of Representatives. That should give the party that once stood for conservative principles and a belief in classical liberalism an opportunity to make a difference. I AM NOT HOLDING MY BREATHE.

Once again I suppose I will be criticized, perhaps even vilified by some of my conservative readership. However, often it is instructional to think outside the box if you will. Or perhaps put a better way to keep an open mind and at least consider and acknowledge when opinion that often runs contrary to your own has value. This nation is facing enormous challenges. It is time to think outside the box. It is time to act in our nations best interest and not just the interests of the powerful, connected, and the wealthy corporations.

It is time we acted in the interests of We the People.

I found the following article, "The Luck of the Irish" quite interesting, even informative.  Is the author right? I don't know with certainty. But perhaps it is at least worth considering.

4 comments:

  1. If I'm understanding your message Les, it's tax enough to pay for necessary and Constitutional government and make unions viable again.

    Well done sir.

    ReplyDelete
  2. If we sit back and actually analyze economics (thats a totally different field than finance) its very easy to understand the beauty of capitalism: Of supply and demand.

    When you look at what makes up our GDP today and what made up our GDP back 50 years ago you realize that healthcare, finance, and technology, or services, represent 72% of our GDP.

    In regards to healthcare, the government is responsible for almost half of this industries sales via medicad/medicare/veteran affairs/and research. In regards to finance, well with Fannie/Freddie and TARP, along with the government debt that accounts for a tremendous amount of their income also.

    Two of the biggest sectors of our GDP are dependent upon government for a growing portion of their income.

    Forget taxes and government expenditures and focus on our economic system....something is totally wrong with it and I think we need to fix it first.

    We are losing our small regional and community banks at an alarming rate already this year we have lost more small banks than we did last year and it is projected that we will lose even more next year.

    The SBA has given out fewer loans this year, even though they have seen the highest number of requests than they have ever seen, than any other year in its history.

    That means less new start ups, and eventually we will no longer have entreprenuers...

    We have a Treasury Secretary that represents Wall Street, we have a Defense Secretary that represents the military industrial complex, we have a Commerce Secretary that represents big business and seeks out trade deals for big business...

    We have no one who represents Main Street, no one who represents consumers, no one who represents labor....

    In fact we have a government that actually represents none of us....

    The labor department just tracks employment figures....

    If you wonder why this country is messed up then just look at the GDP and analyze it....

    ReplyDelete
  3. Truth - From a quite long post covering much you have extracted two key points. However, the framework I veiw governmemnt as operting in is no doubt more limited than you would choose.

    Essentially though you are correct sir.

    ReplyDelete
  4. TAO you said...

    We have a Treasury Secretary that represents Wall Street, we have a Defense Secretary that represents the military industrial complex, we have a Commerce Secretary that represents big business and seeks out trade deals for big business...

    We have no one who represents Main Street, no one who represents consumers, no one who represents labor....

    In fact we have a government that actually represents none of us....

    Agreed.

    We have a government that respresents itself through the special interests that feed it. Or something like that.

    Still government needs to be trimmed, it is part of the problem. Or perhaps more accurately stated those we elect to represent us are part of the problem.

    At any rate we all can agree we have large problems and we need to start somewhere in correcting them.

    Our economic may be the best place to start. Returning it to sound capitialism (absent the crony) is my choice.

    ReplyDelete

As this site encourages free speech and expression any and all honest political commentary is acceptable. Comments with cursing or vulgar language will not be posted.

Effective 8/12/13 Anonymous commenting has been disabled. This unfortunate action was made necessary due to the volume of Anonymous comments that are either off topic or serve only to disrupt honest discourse..

I apologizes for any inconvenience this necessary action may cause the honest Anonymous who would comment here, respect proper decorum and leave comments of value. However, The multitude of trollish attack comments from both the left and right has necessitated this action.

Thank you for your understanding... The management.